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Prices 'down 45%' for some buyers!
There are a number of house buyers who are already much, much happier about the housing market and who are pulling on their buying boots. Sadly there aren't too many of them and they aren't looking to buy just anywhere but they are real and for them, house prices in central London are over 45% cheaper than they were 12 months ago.
They are 'dollar based' buyers, people who are paid in Greenbacks or whose businesses are north American or in Oil for example.
These people have seen not only the 25% fall in prices that we have all witnessed (ignore the surveys that say that house prices have fallen a little over 10% - they reflect deals done in the summer) they have the added advantage of the collapse in Sterling and the exchange rate verses both the Dollar and the Euro. For Euro based buyers the reduction is just 35%!
Is this the bottom of the market?
What this means is that we already have a group of buyers that can see that houses are genuinely cheaper and when they do, they are motivated to buy. What this tells the rest of us is that once prices are close to 45% lower than the peak in the summer of last year, buyers have enough confidence to commit once again to a purchase.
You have to allow for the domestic purchasers reluctance to be the first to jump in and his continuing problem in actually getting a mortgage even if he wants to buy but what it means is that the floor (or bottom) that the market is looking for where confidence can return and people will feel that they appreciate 'value' is around the values of 2000/2001 and about 50% below the peak of the market. This is helpful for two reasons:
Firstly we all need to know what homes are worth. Even if you are not buying or selling, understanding what your property is worth helps you to decide what your own assets are worth and as a consequence how wealthy (or poor) you are.
Secondly, when - or if banks go back to work and start lending again, many will look to the collateral in property when they consider a loan application either for a small business of an individual.
The volume of sales is at a 30 year low. Just 16,000 homes have so far been recorded as having been sold in October, down from 90,000 last year and 114,000 in 2006. The million odd that were sold in 2007 looks like it will be cut back to around 640,000 this year with up to 10% of those being repossessions.
What does next year look like?
2009 looks like it will be even bleaker. The reality of what has happened will have sunk in and vendors will appreciate that their home is worth far less than they had thought but, and it's a big but, it should be possible for those who do want to sell to be able to do so. There will at least be a market.
I suspect that repossession will rise again in 2009. The number of estate agents will continue to fall and the number of homes that will sell will rise again. Values will continue to fall as far as the traditional indices are concerned with the likes of Nationwide and Halifax ending the year down 15%, the Land Registry down 20% and asking prices a full 15% below where they are today.
Banks and building societies have already had £100 billion in hand outs over the past 18 months. They are reported to have been borrowing up to £700 billion via the interbank system - something that they can no longer do today. Until they are able to raise this kind of money again, via depositors in the main, they will be unable to come back to the lending game. I fancy that this might take them some time.
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